NYC to get 12,000 new apartments from outdated office buildings

New York developers are transforming struggling office buildings into more than 12,000 new apartments in a bid to help offset the city's worst housing crisis in decades. 

Most of the units are either starting or completing construction next year and over 3,000 of them will be earmarked as permanently affordable homes, according to a new estimate from the Adams administration which tracks progress on City of Yes — a 2024 zoning overhaul designed to spur housing development. A change in a tax-incentive last year also contributed to the growth. 

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Real estate developers have already turned iconic towers like Goldman Sachs Group Inc.'s former headquarters and JPMorgan Chase & Co.'s old brick fortress into luxury apartments, helping remake the Financial District into a residential neighborhood after banks moved uptown. There's been a more recent push into midtown Manhattan, with firms lined up to convert Pfizer Inc.'s former headquarters into more than 1,500 rentals and others overhauling the Archdiocese of New York's onetime home.

"We're very encouraged by what we're seeing in a short period of time," City Planning Department Director Dan Garodnick said in an interview. "We have a high vacancy rate in our commercial office buildings and a very, very dangerously low vacancy rate in our rental housing, and creating an opportunity for offices to convert into housing makes a lot of sense."

Nearly 90 buildings have already joined a city program to help navigate government approvals for conversions, according to the city department. But after the recent frenzy, possible conversion candidates could face competition as Manhattan's commercial real estate is seeing a stronger lease environment this year. Plus, transitioning an office building to residential apartments is tricky as many have dim interiors, vast floor plates, and reams of regulations. 

Manhattan's office market is on pace for record levels of leasing in 2025, according to Michael Slattery, tri-state research director at CBRE Group Inc. 

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"The opportunities for conversions are still there," Slattery said, as companies aren't leasing office space in obsolete buildings. He noted neighborhoods of the city that may struggle with new conversions include older buildings in geographically-desirable areas. 

New York City's housing shortage and sky high rents became a central theme in November's mayoral election. Mayor-Elect Zohran Mamdani ran on a promise to freeze rents and build tens of thousands of new units to bring down housing costs. 

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Outgoing Mayor Eric Adams' City of Yes also includes other provisions to stimulate housing growth across New York. His office said more than 100 developments have applied to add new homes under a initiative that relaxed zoning rules for the construction of affordable units. Additionally, he encouraged residents to add so-called accessory dwelling units to increase capacity. Those could be backyard cottages or basement apartments that are part of the property of an already existing home. 

That program is off to a slower start, according to the city. Fewer than 100 households have applied for ADUs through City of Yes. Garodnick said it took time to put rules in place, and he hopes more will apply.